Farming News Review - June 2005

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Policy issues CAP (etc.) support details/payments Grants Farm finance Product prices

Other crop news Other livestock news Inputs Marketing Miscellaneous

Policy issues

In the ministerial reshuffle following Labour’s third successive victory in the General Election (albeit with a much-reduced majority) Margaret Beckett remains Secretary of State for Environment, Food & Rural Affairs, as do Elliot Morley as Minister of State (climate change and environment) and Ben Bradshaw as Parliamentary Secretary. There are two new junior ministers: Jim Knight (MP for Dorset South, previously PPS at the Department of Health) replaces Alun Michael (who moves to the new Productivity, Energy and Industry Department) as Rural Affairs junior minister and Lord (Willy) Bach of Lutterworth becomes Parliamentary Secretary at the House of Lords, replacing Lord (Larry) Whitty (who has retired from politics).
Oliver Letwin, previously shadow Chancellor of the Exchequer, has been appointed shadow Secretary of State for Environment, Food & Rural Affairs, replacing Tim Yeo. James Paice continues as shadow Minister for Agriculture & Rural Affairs and Owen Paterson remains responsible for animal welfare and fisheries. Bill Wiggin joins the shadow Defra team, while remaining shadow Secretary of State for Wales.
For the Liberal Democrats Norman Baker, MP for Lewes in Sussex, is to combine the roles of shadow Secretary for Environment, Rural Affairs and Animal Welfare. Joining him are Sue Doughty, Andrew George and Roger Williams.
In the Queen’s Speech: the new parliamentary session will include the introduction of a Natural Environment & Rural Communities Bill (already done (see III.4 below)), an Animal Welfare Bill and a Common Land Bill.
Six member countries, including the UK, France & Germany, are pushing for total EU expenditure to be cut from the proposed 1.14% of gross national income (GNI) to 1%. This would amount to a cut of 28 billion euros (£19 billion) a year and would seriously threaten the level of agricultural support.
A committee of Euro-MPs has called on member states to increase their contributions to the EU, to help pay for enlargement and rural development without the need to cut farm spending.
The EC is reclaiming nearly 280 million euros (approx. £190 million) from ten member states for non-compliance with rules on agricultural expenditure or inadequate control procedures. Spain has to repay more than half the total (including all the flax support it received between 1998 and 2000). Italy is to repay nearly £50 million. The UK is to repay some £7.2 million for mistakes on identification and registration relating to livestock premium claims.
After months of infighting in attempting to harmonise import tariffs trade ministers representing 30 countries finally reached an agreement on a new system for converting existing tariffs into so-called “ad valorem equivalents”. This is considered to be an important breakthrough in the Doha Development Round of world trade talks. The WTO’s 147 member countries’ representatives meet in Hong Kong in December to attempt to reach agreement.
A recent WTO ruling against the current EU sugar regime as being illegal threatens an even larger reduction in the sugar beet price than the 37% over three years already forecast. A leaked draft document on the latest EC proposals refers to a 43% cut (with 60% compensation).
Former EU trade commissioner Pascal Lamy has been confirmed as the next director general of the WTO and will take up his post in September.

CAP (etc.) support details/payments

English farmers can receive their single farm payments in euros, under certain conditions. Caution is advised before making this decision.
Defra says it will not let farmers claim “force majeure” if they put extra land (previously permanent pasture) into set-aside because they lost their animals to foot-and-mouth in 2001. It means these farmers (up to 150 of them) lose out regarding their single farm payments. The NFU is challenging Defra’s decision.
Outdoor pig producers (who fear cross-compliance rules could stop them claiming the single farm payment on their land) have been told they can claim the payment if they draw up a soil management plan.

Grants/regulations/legislation/environment

The deadline for English farmers to apply for the Entry Level Scheme has been extended from the original date, 18th May, to 1st July, because technical problems have meant that many farmers have found it virtually impossible to sign up, for which the government has apologised. In Scotland the deadline for applications to the Land Management Contract Menu Scheme has been extended from 16th May to 6th June.
The Welsh Assembly has pledged that the proposed cuts in its agri-environment payments (Tir Cymen & Tir Gofal (see May MFU, III.4)) will not be made until farming representatives have been consulted. The Welsh Assembly civil servants have argued that the cuts are necessary to prevent farmers from being paid twice for cutting stocking rates.
The Scottish Executive has proposed a cut of £3.9 million (12.5%) in agri-environment payments: reductions are proposed in 134 of 441 measures. Farmers and crofters are furious at the lack of prior consultation. As in Wales, the reason put forward for the cuts is to avoid double funding as a result of the introduction of the single farm payment. Ross Finnie has been forced to intervene and has asked for the schemes to be further reviewed.
The Natural Environment and Rural Communities Bill has been introduced in the House of Commons. It will create a new agency, Natural England, combining English Nature, parts of the Countryside Agency and most of the Rural Development Service and be responsible for landscapes and biodiversity. It will also establish a Commission for Rural Communities to watch out for rural interests.
A report on the implementation of cross-compliance in the EU says it is at best patchy and at its worst almost non-existent in some member states. The UK scores best and Italy worst.
The draft “National Strategy For The Sustainable Use of Plant Products” has been launched for consultation; it outlines the government’s proposed measures for the responsible use of pesticides.
The National Sprayer Testing Scheme has achieved the target set by the Voluntary Initiative by covering 50% of the total UK sprayed area by 31st March.
The EC is to be asked for a derogation to allow producers affected by the sheep scrapie cull to remain eligible for the 2006 Hill Farm Allowances. The cull may have left them with too low a stocking rate to be eligible.

Other matters of farm finance and tenure

According to the latest quarterly farmland value data from the RICS the average dropped in the first three months of this year by 2.9% compared with the previous quarter, to £9,554/ha (£3,886/acre), but this is still 14.3% higher than the same quarter a year ago. Bare land increased to an average £7,804/ha (£3,158/acre), which is 6.5% above the previous quarter and 12.7% up on a year ago. It is to be remembered that the sample sizes are relatively small.
Tilhill and Savills have reported that in 2004 mature timber plantation values increased for the first time in six years; the overall average was £1,817/ha (£735/acre). Small woods in England and Wales averaged £7,400 (2,995); £10,300 (4,168) in the south-east.
Bank lending to UK farmers in the first quarter of this year was 3% higher than a year ago.
The sterling value of the euro has been close to 68.75p during the second half of May.

Product prices

A. Crops

Severe drought across Spain and Portugal lifted UK wheat prices by a few pounds a tonne, cancelling a previous drop. However, there remain large amounts in intervention in EU member states. Plantings in Australia have been held back by dry weather.
Average prices in late May (£/tonne, ex-farm): feed wheat 64, milling 82; feed barley 63.50; oilseed rape 128; feed peas and beans 92.
Potatoes average £102/tonne (£90 spot price). Quality King Edwards are at £160-£200, best Pipers £90-£120, peelers £20-£45.

B. Livestock

Finished steer prices were fairly steady during May, averaging 105p/kg lw towards the end of the month.
Finished lamb prices averaged 122p/kg lw in mid-May; new season lambs were averaging 150p/kg lw as the month ended.
The average pig price remained remarkably steady, at close to 106p/kg dw.
Milk prices during May: little change, apart from normal seasonal variations. An unexpected dip in spring milk production has caused milk purchasers additional bills for producers’ seasonality premiums; Robert Wiseman Dairies is cutting its May and June seasonally-adjusted base price by 0.2ppl. The MDC estimates that the supermarket “price war” cost dairy farmers £9.5 million (0.34ppl) through price cuts during the past year.

Other crop news

Crops generally are making steady progress in a mainly miserably cool May; rainfall and winds have been highly variable across the UK.
The Home Grown Cereals Authority has decided its future priorities, based on last year’s independent review. Some areas of work have been frozen until sponsorship becomes available.
Centaur Grain has made a three-year oat supply deal with European Oat Millers for 15,000 tonnes a year. Fixed price contracts will be offered to UK producers.
The American Soybean Association has produced a pro-GM report, “Dispelling the Myths”. Members of the association have visited the UK to promote GM benefits.
EU scientists have again failed to approve two recommendations by the EC for the use of GM crops in livestock and human food.
The horticultural industry is worried that the Home Office’s Seasonal Agricultural Workers Scheme, which has operated for more than 50 years, may be phased out, as both the Labour and Conservative election manifestoes indicated that immigrant workers had to come from within the EU.

Other livestock news

Milk production in April was the lowest for that month for the third year in succession. Quota values (4% BF) fell to 1.62ppl to lease, 7.73ppl to buy.
According to a survey by the Milk Development Council the exodus of UK dairy farmers is slowing down – though 5% still plan to give up dairying in the next two years: in south-east England 17% plan to do so.
Dairy UK has set out the industry’s issues and objectives in a report, “Going Forward – the UK Dairy Agenda”. In August the chairman changes, a Curry replacing a Curry: David for Sir Don.
British milk consumption has begun to rise – for the first time for 30 years. The most likely reasons are thought to be better marketing, promotional campaigns and the Atkins and Glycaemic diets.
A new study, published in the Journal of Epidemiology and Community Health, says a diet rich in milk may protect people from heart disease and strokes.
The Centre for Dairy Information has been launched, chaired by Prof. Sir John Marsh. UK dairy cattle breed societies and two milk recording organisations have pooled their information into a single national database containing the breeding and performance records of over 75% of the UK’s milk-recorded cows; the project took five years.
Replying to a letter signed by more than 400 vets in February “despairing” over Defra’s inadequate approach to controlling the spread of bovine TB, primarily by strategic badger culling, Margaret Beckett has challenged the vets to provide scientific evidence to justify their demands that culling badgers would solve the problem.
A study based on data from the British Cattle Movement Service has concluded that the primary reason for the spread of bovine TB is the movement of cattle around the country.
Three relatively young cows (36-43 months) have been confirmed as BSE cases on a farm in Wales (Dyfed) – the first time for many years that three animals born in the same place within a short time of each other have had the disease. They are also among the youngest cases in recent years. Scientists are investigating.
The UK farmers’ unions have given their backing to the National Fallen Stock Company, despite widespread criticisms since its formation. The cost of using it has been reduced: the government’s discount for each collection has been raised from 30% to 50%, backdated to 1st April.
A draft Animal Health and Welfare Bill has been issued in Scotland. It places a duty of care on all owners of livestock. It has been welcomed by farmers’ leaders.
New grants to help crofters in Scotland to improve the quality of their cattle have been unveiled; called the Crofters Cattle Quality Improvement Scheme.

Inputs/Supply businesses

Agrochemical distributor and agronomy company United Agri Products (UAP) has confirmed a management buyout, led by managing director Steven Derbyshire, from its owner US food processor Conagra.
Countrywide Farmers (CwF), the UK’s largest farming and rural supplies co-op, is to contract out its compound feed requirement (250,000 tonnes) to BOCM Pauls. Its Melksham mill will be closed and its Presteigne, Powys, mill will be leased to BOCM.
Following De Sangosse’s acquisition of Loveland Industries from Conagra in January the two companies are to merge their operations, trading as De Sangosse and based at Loveland’s premises in Swaffham Bulbeck, Cambs.
Feed manufacturer Pye Bibby has acquired the rights to the blended ruminant feeds produced by J Thomas & Sons at its plant at Whitland, Carmarthenshire.

Marketing

Dairy Crest has bought the Birmingham-based Midlands Co-op milk business for £20 million. Midlands Co-op processes 200 million litres from 285 farms.
Wm Morrison is dropping Robert Wiseman Dairies’ £40 million-a-year share of its milk business, dividing the volume between its other two suppliers, Arla Foods UK and Dairy Crest, each of which will now supply half of Morrisons’ requirement.
Dairy Farmers of Britain’s chief executive Malcolm Smith has resigned, with immediate effect.
Masstock is ending its grain procurement arrangement with Grainfarmers, which began with the latter’s purchase of the Dalgety grain operation in May 2003. From 1st July Masstock will use three regional grain marketing companies: Glencore Grain UK, Wessex Grain and Scotgrain Agriculture.
A third bidder has declared an interest in buying Somerfield: Rochdale-based United Co-operatives, the UK’s second largest co-op. The other two bidders are Baugur and Asda.
Quality Meat Scotland will spend over £1 million this year to promote Scottish beef in England.
Lancaster and Kendal livestock markets are to merge, to become the L & K Group.
The Triple S meat processing plant in Newton Abbott, Devon, which went into voluntary liquidation last year, has been bought by a local butcher and farmer, Minehead-based Gerald David & Family.
St Merryn Foods is to double its lamb throughput to about 25,000 a week from its Merthyr Tydfil abattoir, having extended its existing business with Tesco.
The Irish-owned firm Anglo Beef Processors is to close its lamb processing abattoir at Bathgate, West Lothian. The factory handled about 500,000 lambs a year – a third of those processed in Scotland.
The privately owned Skegness abattoir has been sold to a South Lincs. farming business JH & AJ King.
An accreditation scheme, the Abattoir and Processor Standard, has been launched, to help medium-sized and small abattoirs and processors meet the growing demand for assured specialty products. The scheme has been developed by The Association of Independent Meat Suppliers, in conjunction with Assured British Meats.
Following a two-year pilot scheme by the Food Chain Centre, the Academy of Consumer Research has been launched at Kent Business School in Canterbury, to be headed by Dr. Andrew Fearne.

Miscellaneous

Euro-MPs have voted to end Britain’s special derogation (i.e. opt out) from the EU’s 48-hour maximum working week. The review of the “Working Time Directive” will now be sent to EU member states for consideration. The threat to many UK farms is obvious.
Prof. John Moverley, principal and chief executive of Myerscough College, Lancs. has been appointed new chief executive of the R.A.S.E. from 1st December, succeeding Mike Calvert, who is retiring after this year’s Royal Show.
The May (60th) edition of The Agricultural Budgeting and Costing Book is now available (£35, from 01664 567676).